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United States Government Accountability Office:
GAO:
Report to Ranking Member, Committee on the Judiciary, U.S. Senate:
April 2013:
Health Insurance:
Seven States' Actions to Establish Exchanges under the Patient
Protection and Affordable Care Act:
GAO-13-486:
GAO Highlights:
Highlights of GAO-13-486, a report to the Ranking Member, Committee on
the Judiciary, U.S. Senate.
Why GAO Did This Study:
A central provision of PPACA requires the establishment of exchanges
in each state—-online marketplaces through which eligible individuals
and small business employers can compare and select health insurance
coverage from participating health plans. Exchanges are to begin
enrollment by October 1, 2013, with coverage to commence January 1,
2014. States have some flexibility with respect to exchanges by
choosing to establish and operate an exchange themselves (i.e., state-
based), or by ceding this authority to HHS (i.e., federally
facilitated). States may also choose to enter into a partnership with
HHS whereby HHS establishes the exchange and the state assists with
operating various functions. According to HHS, 18 states will
establish a state-based exchange, while 26 will have a federally
facilitated exchange. Seven states will partner with HHS.
GAO was asked to report on (1) states’ responsibilities for
establishing exchanges, and (2) actions selected states have taken to
establish exchanges and challenges they have encountered. To do this
work, GAO reviewed PPACA provisions and HHS implementing regulations
and guidance. GAO also conducted semistructured interviews with state
officials in the District of Columbia, Iowa, Minnesota, Nevada, New
York, Oregon, and Rhode Island. For this review, GAO refers to the
District of Columbia as a state. GAO selected these states based on
several criteria, such as a 3-year average of states’ uninsured
population and geographic dispersion. HHS and the seven states in our
review provided technical comments on this report, which GAO
incorporated as appropriate.
What GAO Found:
The Patient Protection and Affordable Care Act (PPACA) and the
Department of Health and Human Services (HHS) regulations,
supplemented by HHS guidance, require states and American Health
Benefit Exchanges (exchanges) to carry out a number of key functions,
for which state responsibilities vary by exchange type. A state that
chooses to operate its exchange is responsible for: (1) establishing
an operating and governance structure, (2) ensuring exchanges are
capable of certifying qualified health plans and making them available
to qualified individuals, (3) developing electronic, streamlined, and
coordinated eligibility and enrollment systems, (4) conducting
consumer outreach and assistance, and (5) ensuring the financial
sustainability of the exchange. A state that partners with HHS may
assist HHS with certain functions, such as making qualified health
plan recommendations and conducting aspects of consumer outreach and
assistance.
Despite some challenges, the seven selected states in GAO’s review
reported they have taken actions to create exchanges, which they
expect will be ready for enrollment by the deadline of October 1,
2013. For example:
* Six states will operate as a state-based exchange, with most
choosing this option as a way to maintain control of their insurance
markets and better meet the needs of their state’s residents. The
seventh state-—Iowa—-will partner with HHS.
* All seven states have taken steps toward deciding which qualified
health plans would be included in the exchange. Two states have
decided that their exchanges will have the authority to actively
select which qualified health plans may participate in the exchange,
while the remaining five states will allow all qualified health plans
to participate in the exchange.
* All states are in various stages of developing an information
technology (IT) infrastructure, including redesigning, upgrading, or
replacing their outdated Medicaid and Children’s Health Insurance
Program eligibility and enrollment systems. Six states are also
building the exchange IT infrastructure needed to integrate systems
and allow consumers to navigate among health programs, but identified
challenges with the complexity and magnitude of the IT projects, time
constraints, and guidance for developing their systems.
* Six of the seven states included in our review are in various stages
of developing a consumer outreach and assistance program to reach out
to and help enroll potential consumers. As a partnership state, Iowa
has not yet decided whether and to what extent it will assume
responsibility for aspects of this function.
* Officials in the six state-based exchanges reported they are
considering revenue options for financially sustaining their exchange.
For example, three states plan to charge fees to insurance carriers
participating in the exchange. However, some states reported
challenges with developing these options, given uncertainties related
to exchange enrollment, on which the fees are based.
View [hyperlink, http://www.gao.gov/products/GAO-13-486]. For more
information, contact Stanley J. Czerwinski at (202) 512-6806 or
czerwinskis@gao.gov.
[End of section]
Contents:
Letter:
Background:
States' Responsibilities for Establishing Exchanges Vary, Depending on
the Type of Exchange:
Despite Some Challenges, Selected States Have Taken Action to
Establish Exchanges and Report They Will Be Ready for Enrollment by
October 2013:
Agency Comments:
Appendix I: Objectives, Scope & Methodology:
Appendix II: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Summary of Exchange Operating and Governance Structures in
Selected States:
Table 2: Selected States' Insurance Market Organization and Essential
Health Benefits (EHB):
Table 3: Characteristics of States Included in GAO Study:
Figures:
Figure 1: Distribution of State Decisions on Exchange Type, as of
March 14, 2013:
Figure 2: Timeline for Key Exchange Milestones:
Figure 3: Range of exchange grant funding by state, as of March 27,
2013[A]:
Abbreviations:
BHP: Basic Health Program:
CBO: Congressional Budget Office:
CCIIO: Center for Consumer Information and Insurance Oversight:
CHIP: Children's Health Insurance Program:
CMS: Centers for Medicare & Medicaid Services:
EHB: essential health benefits:
HCERA: Health Care Education and Reconciliation Act:
HHS: U.S. Department of Health and Human Services:
IT: information technology:
PPACA: Patient Protection and Affordable Care Act:
QHP: Qualified Health Plan:
SNAP: Supplemental Nutrition Assistance Program:
TANF: Temporary Assistance for Needy Families:
[End of section]
United States Government Accountability Office:
GAO:
441 G St. N.W.
Washington, DC 20548:
April 30, 2013:
The Honorable Charles E. Grassley:
Ranking Member:
Committee on the Judiciary:
United States Senate:
Dear Senator Grassley:
The Patient Protection and Affordable Care Act (PPACA),[Footnote 1]
signed into law on March 23, 2010, contains a number of provisions
intended to reform aspects of the private health insurance market and
expand the availability and affordability of coverage. A central
provision of the law requires the establishment of American Health
Benefit Exchanges (exchanges) in each state--online marketplaces
through which eligible individuals and small business employers can
compare and select health insurance coverage from among participating
health plans.[Footnote 2] Intended to provide seamless "no wrong door"
access to coverage options, in general, exchanges will need to be able
to determine whether individuals and small business employees[Footnote
3] are eligible for a private health plan, Medicaid,[Footnote 4] or
the Children's Health Insurance Program (CHIP).[Footnote 5],[Footnote
6] This means that no matter how an individual submits an application
or which program receives the application, there will be a process by
which the individual can receive an eligibility determination using
the same application, without the need to submit information to
multiple programs. Exchanges are to begin enrollment by October 1,
2013, with coverage to commence January 1, 2014. The Congressional
Budget Office has estimated that about 7 million individuals will be
enrolled in exchanges in 2014, increasing to about 26 million by 2022.
While PPACA places some requirements on the design and function of
exchanges, states also have a number of operational decisions to make.
A state may establish the exchange itself (referred to as a state-
based exchange), cede the responsibility entirely to the Department of
Health and Human Services (HHS) (referred to as a federally
facilitated exchange), or enter into a partnership with HHS (referred
to as a partnership exchange).[Footnote 7] Depending on the type of
exchange, states are facing a number of critical policy and
implementation decisions, subject to HHS regulation and approval. Such
decisions involve determining individuals' eligibility and enrolling
them in health insurance plans, conducting consumer outreach and
assisting potential enrollees, ensuring qualified health plans are
certified, and ensuring the exchange's long-term financial
sustainability. In addition, states must develop information
technology (IT) systems that securely facilitate the movement of
information to provide enrollees with answers about their eligibility
and enhance their ability to enroll in health insurance coverage.
States are faced with unprecedented levels of data sharing and
coordination between federal agencies, private health plans, state
insurance commissioners, and state Medicaid agencies. As of March 27,
2013, the federal government has awarded states nearly $3.7 billion in
grant funding to cover some of the states' planning and implementation
costs.
You asked us to report on the actions states are taking to establish
exchanges. This report addresses the following questions:
1. What are states' responsibilities for establishing exchanges?
2. What actions have selected states taken to establish exchanges and
what challenges have they encountered?
To identify states' responsibilities for establishing exchanges, we
reviewed selected PPACA provisions and HHS implementing regulations
and guidance related to the following categories of responsibilities:
[Footnote 8]
* establishing a governance and operating structure;
* ensuring exchanges will be capable of certifying qualified health
plans;
* simplifying and streamlining eligibility and enrollment systems;
* conducting consumer assistance and outreach; and:
* ensuring financial sustainability of the exchange.
During our review, we obtained status updates on the development of
regulations and guidance from the Center for Consumer Information and
Insurance Oversight (CCIIO) within HHS's Centers for Medicare &
Medicaid Services (CMS) that oversees the implementation of exchanges.
We also met with CCIIO officials to discuss the ways in which they
provided guidance to the states.
To identify the actions selected states have taken to establish
exchanges and the challenges they encountered, we conducted semi-
structured interviews with state exchange officials in the District of
Columbia and six states: Iowa, Minnesota, Nevada, New York, Oregon,
and Rhode Island. For the purposes of this report, we hereafter refer
to the District of Columbia as a state. We selected these states on
the basis of: (1) a 3-year average of the uninsured population within
states; (2) the uninsured population in states in 2011; (3) the amount
of federal exchange grants awarded to states on a per capita basis;
(4) geographic dispersion, and (5) whether states will have a state-
based, federally facilitated, or partnership exchange.[Footnote 9] Six
states in our review plan to establish and operate a state-based
exchange, while one state--Iowa--opted for a partnership exchange. We
also met with budget officials in some of these states to discuss the
fiscal aspects of establishing exchanges, including how states will
ensure financial sustainability for their exchange. The findings from
these interviews cannot be generalized to all state exchange and
budget offices. We obtained additional information from interviews
with officials from state associations, including the National
Association of Insurance Commissioners, the National Association of
State Budget Officers, and the National Conference of State
Legislatures. Two states that will have federally facilitated
exchanges--Florida and Maine--were initially selected for inclusion in
our review. However, exchange officials in those states declined to be
interviewed. Therefore, this review focuses on states'
responsibilities and actions related to state-based and partnership
exchanges. A more detailed description of our objectives, scope, and
methodology is included in appendix I.
We conducted our work from September 2011 to April 2013 in accordance
with generally accepted government audit standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Background:
Exchanges are online marketplaces where eligible individuals and small
businesses can purchase health insurance. PPACA prescribes a seamless,
streamlined eligibility process for consumers to submit a single
application and receive an eligibility determination for enrollment in
a qualified health plan through the exchange, advance payments of the
premium tax credit,[Footnote 10] cost sharing reductions,[Footnote 11]
Medicaid, CHIP, and the Basic Health Program (BHP),[Footnote 12] if
applicable.
Under PPACA, an exchange must be operational in each state by January
1, 2014. States have some flexibility with respect to exchanges, by
choosing to establish and operate an exchange themselves (referred to
as a state-based exchange) or by ceding this authority to HHS
(referred to as a federally facilitated exchange).[Footnote 13] States
choosing to establish a state-based exchange were required to submit
an application "blueprint" to HHS by December 14, 2012. Subject to HHS
review and approval, the blueprint detailed how the states planned to
implement various functions and activities that HHS deemed essential
to operating this type of exchange. HHS identified a third type of
exchange states could choose, referred to as a partnership exchange.
According to HHS, a partnership exchange is a variation of a federally
facilitated exchange, whereby HHS establishes and generally operates
the exchange and the state assists HHS with operating various
functions of the exchange. States opting for a partnership exchange
were required to submit an application blueprint to HHS by February
15, 2013, detailing how the state planned to implement various
functions and activities. According to HHS, as of March 14, 2013, 18
states have opted to establish a state-based exchange. In another 7
states, HHS will establish and operate a partnership exchange, with
states assisting in certain functions (see figure 1). HHS's approval
of these exchanges is conditional on the states' addressing a list of
activities highlighted in the state's application blueprint. HHS will
establish a federally facilitated exchange in the remaining 26 states.
Figure 1: Distribution of State Decisions on Exchange Type, as of
March 14, 2013:
[Refer to PDF for image: illustrated U.S. map]
Partnership exchange:
Alabama:
Alaska:
Arizona:
Florida:
Georgia:
Indiana:
Kansas:
Louisiana:
Maine:
Mississippi:
Missouri:
Montana:
Nebraska:
New Jersey:
North Carolina:
North Dakota:
Ohio:
Oklahoma:
Pennsylvania:
South Carolina:
South Dakota:
Tennessee:
Texas:
Virginia:
Wisconsin:
Wyoming.
Federally facilitated exchange:
Arkansas:
Delaware:
Illinois:
Iowa:
Michigan:
New Hampshire:
West Virginia.
State-based exchange:
California:
Connecticut:
Colorado:
District of Columbia:
Hawaii:
Idaho:
Kentucky:
Maryland:
Massachusetts:
Minnesota:
Nevada:
New Mexico:
New York:
Oregon:
Rhode Island:
Utah:
Vermont:
Washington.
Source: GAO analysis of CMS data; Map Resources (map).
[End of figure]
Regardless of the type of exchange states plan to establish, open
enrollment in the exchange is to begin on October 1, 2013. See figure
2 for a timeline of key milestones under PPACA.
Figure 2: Timeline for Key Exchange Milestones:
[Refer to PDF for image: timeline]
March 23, 2010:
Patient Protection and Affordable Care Act (PPACA) enacted.
September 1, 2010:
States can apply to HHS for grants to plan their exchanges.
October 29, 2010:
States can apply to HHS for early innovator grants.
January 20, 2011:
States can apply to HHS for establishment grants.
August 14, 2012:
HHS releases blueprint for approval of state-based and partnership
exchanges.
November 9, 2012:
HHS extends deadline for blueprint submissions for state-based and
partnership exchanges.
December 14, 2012:
Deadline for blueprint submissions for state-based exchanges.
January 1, 2013:
HHS grants approval to states for state-based exchanges.
February 15, 2013:
Deadline for blueprint submissions for partnership exchanges.
March 1, 2013:
HHS grants approval to states for partnership exchanges.
October 1, 2013:
Initial exchange enrollment begins.
January 1, 2014:
Exchange coverage commences.
January 1, 2015:
States’ exchanges must be self sustaining.
Source: GAO analysis of relevant PPACA provisions and HHS regulations
and guidance.
[End of figure]
To help states establish an exchange, federal grants are available for
planning and implementation activities, as well as for the first year
of an exchange's operation. As shown in figure 2, beginning in
September 2010, states could apply for up to $1 million in planning
grants to conduct initial research and exchange planning
activities.[Footnote 14] Establishment grants became available to
eligible states to set up their own exchanges or to support activities
related to the establishment of partnership exchanges or federally
facilitated exchanges in the state.[Footnote 15] States could also
apply for "early innovator" grants to help them develop and adapt
technology systems to determine eligibility and enrollment. These
grants were awarded in 2011 to states that demonstrated an ability to
develop IT systems on a fast track schedule and a willingness to share
design and implementation solutions with other states. Between
September 2010 and March 2013, HHS awarded exchange grants totaling
nearly $3.7 billion to 50 states.[Footnote 16],[Footnote 17] Of that
amount, states returned over $98 million in grant awards.[Footnote 18]
HHS awarded over $1 billion dollars to the 7 states in our review--New
York and Oregon were awarded the largest amounts. Figure 3 shows the
range of exchange grant funding by state as of March 27, 2013.
Figure 3: Range of exchange grant funding by state, as of March 27,
2013[A]:
[Refer to PDF for image: illustrated U.S. map]
$0:
Alaska:
Florida:
Up to $4.9 million:
Georgia:
Kansas:
Louisiana:
Maine:
Montana:
New Hampshire:
North Dakota:
Ohio:
Oklahoma:
South Carolina:
Texas:
Utah:
Wyoming.
$5 million to $49.9 million:
Alabama:
Arizona:
Arkansas:
Delaware:
Idaho:
Illinois:
Indiana:
Iowa:
Michigan:
Mississippi:
Missouri:
Nebraska:
New Jersey:
New Mexico:
Pennsylvania:
South Dakota:
Tennessee:
Virginia:
West Virginia:
Wisconsin.
$50 million to $124.9 million:
Colorado:
Connecticut:
District of Columbia:
Hawaii:
Minnesota:
Nevada:
North Carolina:
Rhode Island:
Vermont.
$125 million to $911 million:
California:
Oregon:
Washington:
Kentucky:
Maryland:
Massachusetts:
New York.
Source: GAO analysis of CMS data; Map Resources (map).
[A] Grant funding reflects the total amounts awarded minus amounts
that a state returned. As noted earlier, certain states have returned
this funding to HHS for reasons such as a state's decision not to
pursue a state-based exchange.
[End of figure]
States' Responsibilities for Establishing Exchanges Vary, Depending on
the Type of Exchange:
PPACA and HHS implementing regulations and guidance require states and
exchanges to carry out a number of key functions, for which state
responsibilities vary by exchange type. A state that chooses to run
its own exchange is responsible for: establishing an operating and
governance structure, ensuring QHPs are certified and available to
qualified individuals,[Footnote 19] streamlining eligibility and
enrollment systems, conducting consumer outreach and assistance, and
ensuring the financial sustainability of the exchange. A state that
has created a partnership exchange may assist HHS in some of these
functions, such as making QHP certification recommendations and
conducting aspects of consumer outreach and assistance.
States Must Establish an Operating and Governance Structure:
A state choosing to operate a state-based exchange must establish the
operating and governance structure through which the exchange will be
run and managed. Specifically, the state must determine whether the
exchange will be run as a governmental agency or a nonprofit
organization. Regardless of whether the exchange will be run as a
governmental agency or a nonprofit, the state has the authority to
allow an exchange to contract with other entities to carry out one or
more responsibilities of the exchange.[Footnote 20]
Further, a state operating an exchange as an independent state agency
or nonprofit entity established by the state must establish a
governance board that meets certain requirements. For example, the
board must be administered under a publicly adopted operating charter
or by-laws, ensure the board's membership includes at least one voting
member who is a consumer representative and is not made up of a
majority of voting representatives with conflicts of interest (for
example, representatives of health insurance issuers), and ensure that
a majority of the voting members have relevant health care experience
(for example, health benefits administration or public health).
States Must Ensure Exchanges Will be Capable of Certifying Qualified
Health Plans:
States choosing to operate their own exchange must ensure the exchange
will be capable of certifying qualified health plans (QHP) and making
them available to qualified individuals. A state opting for a
partnership exchange may choose to engage in this function. In a
partnership exchange, health insurance issuers will work directly with
the state to submit all QHP issuer application information in
accordance with state guidance.[Footnote 21] An exchange may only
offer health plans that are certified as a QHP. To be certified, a
health plan must meet two categories of requirements: (1) the health
insurance issuer must be in compliance with minimum certification
requirements as defined by HHS; and (2) the availability of the health
plan through an exchange must be in the interest of qualified
individuals and employers. To meet the minimum certification
requirements, health insurance issuers must, for example, (1) be
licensed and in good standing in each state in which the insurance
coverage is offered,[Footnote 22] (2) comply with quality improvement
standards, and (3) ensure their plan networks are adequate and include
essential community health providers, where available, to provide
timely access to services for predominantly low-income, medically
underserved individuals.
How an exchange determines whether a plan is in the interest of
qualified individuals and employers may depend on how the state
organizes its market. The state may choose to organize its market as
an "active purchaser" or as a "passive purchaser." As an active
purchaser, the state will decide which health plans can be offered in
the exchange on the basis of such factors as select criteria, quality,
and price. As a passive purchaser, the state may permit all QHPs to
participate in the exchange.
In order to be certified as a QHP, plans will also need to meet
certain coverage requirements. Specifically, PPACA requires that QHPs
provide essential health benefits (EHB) which include coverage within
10 categories:
1. Ambulatory patient services,
2. Emergency services,
3. Hospitalization,
4. Maternity and newborn care,
5. Mental health benefits and substance abuse disorder services,
including behavioral health treatment,
6. Prescription drugs,
7. Rehabilitative and habilitative services and devices,
8. Laboratory services,
9. Preventive and wellness services and chronic disease management,
and:
10. Pediatric services including oral and vision care.[Footnote 23]
In addition, within an exchange, health insurance issuers may offer
QHPs at one of four levels of coverage that reflect out-of-pocket
expenses for an enrollee. The four levels of coverage correspond to a
percentage paid by a health plan of the total allowed costs of benefit
designated by metal tiers: 60 percent (bronze), 70 percent (silver),
80 percent (gold), and 90 percent (platinum).[Footnote 24] At a
minimum, however, a health insurance issuer must offer QHPs at both
the silver and gold levels of coverage.
States may choose to identify a benchmark plan for their state that,
at a minimum, covers the EHB. According to HHS, the benchmark plan
reflects the scope of services and limits offered by a "typical
employer" plan in the state.[Footnote 25] HHS identified four plans
that a state could choose: (1) one of the three largest plans in the
state's small group market health insurance plans; (2) one of the
three largest state employee health benefit plans; (3) one of the
three largest national plans offered through the Federal Employees
Health Benefits Program; or (4) the largest commercial non-Medicaid
health maintenance organization operating in the state. If the state
does not select a benchmark plan, the state will default to the
largest plan by enrollment in the largest product by enrollment in the
state's small group market.[Footnote 26]
States also have the option of requiring QHPs to offer benefits in
addition to EHB. If they choose to do so, states must identify which
specific state-required benefits are in excess of the EHB. Under HHS
regulations, if a state required QHPs to cover benefits beyond EHB on
or after January 1, 2012, the state would be responsible for defraying
the cost of these services.
States Must Streamline Eligibility and Enrollment Systems:
States operating their own exchanges generally must ensure that the
exchanges will be able to determine an applicant's eligibility for
QHPs, as well as for Medicaid and CHIP.[Footnote 27] Specifically,
under PPACA and implementing regulations, states must establish an
electronic, streamlined, and coordinated system through which an
individual may apply for and receive a determination of eligibility
for enrollment in a QHP,[Footnote 28] Medicaid, CHIP, or Basic Health
Program, if applicable. Exchanges must be able to use a single
application that can be completed online, by mail, over the telephone,
or in person. This means that no matter how an individual submits an
application or which program receives the application, an individual
will use the same application and receive an eligibility
determination, without the need to submit information to multiple
programs. Thus, state IT systems must be interoperable and integrated
with an exchange, Medicaid, and CHIP to allow consumers to easily
switch from private insurance to Medicaid and CHIP as their
circumstances change. Exchanges must also be able to transmit certain
data to HHS to be verified before determining applicants' eligibility.
HHS, through a "federal data services hub," will coordinate with the
Department of Homeland Security, the Internal Revenue Service, and
other federal agencies to verify applicant information, such as
citizenship and household income. With the amount of data that states
must share with HHS in order to verify eligibility, developing
streamlined eligibility and enrollment systems is a vast undertaking
requiring states to develop sophisticated IT systems.
As part of the enrollment and eligibility process, HHS directs
exchanges to rely on existing electronic sources of data to the
maximum extent possible to verify relevant information, with high
levels of privacy and security protection for consumers. For the
majority of applicants, an automated electronic data matching process
should eliminate the need for paper documentation.
States Must Conduct Consumer Assistance and Outreach:
States that operate their own exchange are required to conduct
consumer assistance and outreach through a number of activities.
States that partner with HHS may assume some aspects of this function.
Specifically, exchanges must have consumer assistance functions that
are available to consumers to provide help in using the exchange. Such
functions are required to be accessible to individuals with
disabilities and individuals with limited English proficiency.
Exchanges are also required to operate a toll-free call center and
maintain a website that, among other things, allows consumers to
compare qualified health plan benefits, costs, and quality ratings,
and select and enroll in a plan. Further, exchanges must assist
consumers with accessing and obtaining coverage, including providing
tools to help consumers access the exchange, determine which plan or
program to enroll in, and determine their eligibility for premium tax
credits and cost sharing reductions.
As part of states' consumer outreach and assistance activities, each
exchange is also required to operate a navigator program, which will
provide eligible organizations with grants so they can raise awareness
of QHPs' availability and facilitate consumers' selection of QHPs.
Navigators may include organizations such as trade associations,
community and consumer-focused non-profit groups and chambers of
commerce. Navigators must maintain expertise in eligibility,
enrollment, and program specifications. The entity serving as a
navigator must deliver information to the public in a fair, accurate,
and impartial manner that is culturally and linguistically appropriate
to the needs of the population they serve.[Footnote 29] HHS afforded
state-based exchanges the opportunity to use in-person assisters in
certain circumstances to ensure that the full range of services that
the navigator program will provide in subsequent years are provided
during the exchanges' initial year of operation. State partnership
exchanges in which states will assist with consumer assistance
functions will be required to establish and operate an in-person
assistance program. While in-person assisters may receive the same
training as navigators, they are part of a separate and distinct
program and can use establishment grants to fund their operation.
PPACA requires that exchanges regularly consult with certain groups of
stakeholders for all activities, including establishing and operating
consumer assistance programs. These stakeholders include educated
health care consumers enrolled in QHPs, representatives of small
businesses and self-employed individuals, advocates for enrolling hard-
to-reach populations, and individuals and entities with experience in
facilitating enrollment in health insurance coverage. Further, HHS
provided supplementing guidance on activities states may want to
consider as part of their outreach and education, including: [Footnote
30]
* performing market analysis or an environmental scan to assess
outreach and education needs to determine geographic and demographic-
based target areas and vulnerable populations for outreach efforts;
* developing a "toolkit" for outreach to include educational materials
and information;
* designing a media strategy and other information dissemination
tools; and:
* submitting a final outreach and education plan to HHS.
States Must Ensure Financial Sustainability of the Exchange:
States operating their own exchanges are required to ensure their
exchanges will be self-sustaining by 2015--meaning that states must
ensure their exchanges have sufficient funding to support ongoing
operations.[Footnote 31] PPACA allows these exchanges to generate
funding for exchange operations in certain ways, such as charging user
fees or other assessment fees to exchange-participating health
insurance issuers. Under HHS guidance, states are to submit a plan to
HHS to demonstrate how their exchanges will be financially sustainable
by January 1, 2015.
Despite Some Challenges, Selected States Have Taken Action to
Establish Exchanges and Report They Will Be Ready for Enrollment by
October 2013:
Nearly All Selected States Have Created an Operating and Governance
Structure:
Six of the seven states in our study were conditionally approved by
HHS to create a state-based exchange. State exchange officials we
interviewed said that, among the reasons that states chose to
establish this type of exchange are that it allows the state to (1)
maintain consistency between the insurance market inside and outside
the exchange, (2) better control its insurance market, and (3) have
opportunities to better meet the unique needs of the state's
population. In contrast, Iowa officials said the state opted to
partner with HHS due to the high cost of building and maintaining a
state-based exchange--which the state estimated to be $15.9 million
annually. Iowa officials also reported that, by assuming
responsibility over certain exchange activities, such as overseeing
and certifying qualified health plans, partnering with HHS allows the
state to maintain regulatory control over its insurance market. Iowa
officials told us that the state plans to transition to a state-based
exchange sometime in the future.
To begin building an exchange, six of the seven states have
established an operating structure through state legislation or by
executive order. As a partnership state, Iowa is not establishing an
operating structure at this time because HHS will initially establish
and operate the exchange. As Iowa switches to a state-based exchange,
it will need to establish an operating structure.
As shown in table 1, states varied in how they established their
exchange operating structures. For example, three states--New York,
Nevada, and Rhode Island--plan to run their exchange as entities
within an existing state agency. Exchange officials in New York told
us that basing the exchange within an existing state agency--New
York's Department of Health--allows the state to leverage established
administrative systems and procedures, thereby relieving the exchange
from some of the administrative burdens common to start-up
organizations. Table 1 also shows that five out of the six states that
have established an exchange have also created a governance board that
ranges in member composition and expertise. Consistent with HHS
regulation, all five governance boards include members that represent
consumer interests.
Table 1: Summary of Exchange Operating and Governance Structures in
Selected States:
State: District of Columbia;
Type of exchange: State-based;
Operating structure: Independent authority established by state
legislation;
Governance structure: 11 Board members: 4 non-voting ex officio
members (or their designees) and 7 voting members appointed by the
mayor with the consent of the council with demonstrated expertise in
at least 2 of 12 designated areas, such as health care financing and
public health programs; at least 1 member must possess knowledge of
health care consumer interest advocacy. An executive director, hired
by the board, will direct, administer, and manage the operations of
the authority.
State: Iowa;
Type of exchange: Partnership;
Operating structure: Will defer to HHS;
Governance structure: Will defer to HHS.
State: Minnesota;
Type of exchange: State-based;
Operating structure: Board established by state legislation[A];
Governance structure: 7 Board members: the commissioner of Human
Services (or a designee) and 6 members appointed by the governor with
the consent of both the state Senate and the House of Representatives--
1 member representing interests of individual consumers eligible for
individual market coverage, 1 member representing individual consumers
eligible for public health care program coverage, 1 member
representing small employers, 1 member with expertise in health
administration and health care finance, 1 member with expertise in
public health and the uninsured, and 1 member representing health
policy issues related to small group and individual markets.
State: Nevada;
Type of exchange: State-based;
Operating structure: Independent public agency established by state
legislation;
Governance structure: 10 Board members: 3 ex officio non-voting
members (or their designees) and 7 voting members--5 appointed by the
governor, 1 member appointed by the Senate majority leader and 1
member appointed by the speaker of Assembly. The Board has 5 advisory
committees: (1) Finance and Sustainability; (2) Plan Certification and
Management; (3) Small Business Health Options Program Exchange; (4)
Reinsurance and Risk Adjustment; and (5) Consumer Assistance.
State: New York;
Type of exchange: State-based;
Operating structure: Division within the New York State Department of
Health established by executive order;
Governance structure: No board created. The New York Health Benefit
Exchange established five regional advisory committees to advise and
make recommendations on the exchange establishment and operations.
Committee members include consumer advocates, small business
representatives, health care providers, health plans, agents, brokers,
insurers, labor organizations, and policy experts.
State: Oregon;
Type of exchange: State-based;
Operating structure: Public corporation established by legislation[B];
Governance structure: 9 Board members: 2 ex officio voting members (or
their designees) and 7 voting members appointed by the governor with
Senate confirmation.[C] At least 2 voting members must be: (1) an
individual consumer purchasing health care through the exchange;
and (2) a small business employer purchasing health care through the
exchange.
State: Rhode Island;
Type of exchange: State-based;
Operating structure: Department within executive department
established by executive order;
Governance structure: 13 Board members, including the director of the
Department of Administration; the Health Insurance Commissioner; the
Secretary of the executive office of Health and Human Services; the
director of the Department of Health; and 9 members appointed by the
governor: 2 represent consumer organizations, 2 represent small
businesses.[D] A director of the Division of the Rhode Island Health
Benefits Exchange--appointed by the governor--will organize,
administer, and manage the operations of the division. No member of
the Board is affiliated with a group or organization that has a
conflict of interest with the exchange.
Source: GAO analysis of state legislation and executive orders.
[A] Under Minnesota law, an agency in the executive branch who is
authorized to (1) perform administrative acts, (2) issue or revoke
licenses or certifications, (3) make rules, or (4) adjudicate
contested cases or appeals must be designated as a "board." The
Minnesota Insurance Marketplace was established with such authorities.
[B] The Oregon Health Insurance Exchange Corporation is a public
corporation performing governmental functions and exercising
governmental powers. O.R.S. § 741.001 (2011).
[C] The voting members must collectively offer expertise, knowledge,
and experience in individual insurance purchasing, business, finance,
sales, health benefits administration, individual and small group
health insurance and use of the health insurance exchange.
[D] The board must include a balance of members with expertise in a
diverse range of health care areas including, but not limited to,
health benefits plan administration, health care finance and
accounting, administering a public or private health care delivery
system, state employee health purchasing, electronic commerce, and
promoting health and wellness.
[End of table]
States Have Taken Steps toward Certifying Qualified Health Plans:
All seven states in our review reported taking steps toward certifying
QHPs. Two states have decided whether their exchanges will have the
authority to actively select which QHPs may participate in the
exchange. As active purchasers, exchanges can select QHPs by applying
additional criteria and negotiating with health insurance issuers, or
by a combination of these actions. As table 2 shows, two states
decided to organize their exchanges as active purchasers, while the
remaining five states will organize their exchanges as passive
purchasers, allowing all plans that meet the minimum requirements for
QHPs to participate in the exchange.
To identify benchmark plans, all selected states analyzed the plans
and considered various factors, including whether the plans offered by
the state required benefits in addition to the EHB required under
PPACA. In choosing their benchmark plans, all seven states identified
plans that included state-mandated benefits that did not exceed
PPACA's EHB requirements. Table 2 shows that five of the seven states
recommended benchmark plans to HHS, while two states chose not to
identify a benchmark plan and will default to the largest small group
plan in their state.
Table 2: Selected States' Insurance Market Organization and Essential
Health Benefits (EHB):
State: District of Columbia;
Market organization: passive purchaser;
Essential health benefits benchmark plan: recommended;
Plan type: small group.
State: Iowa;
Market organization: passive purchaser;
Essential health benefits benchmark plan: defaulted;
Plan type: small group.
State: Minnesota;
Market organization: passive purchaser[A];
Essential health benefits benchmark plan: defaulted;
Plan type: small group.
State: Nevada;
Market organization: passive purchaser;
Essential health benefits benchmark plan: recommended;
Plan type: small group.
State: New York;
Market organization: passive purchaser;
Essential health benefits benchmark plan: recommended;
Plan type: small group.
State: Oregon;
Market organization: active purchaser;
Essential health benefits benchmark plan: recommended;
Plan type: small group.
State: Rhode Island;
Market organization: active purchaser;
Essential health benefits benchmark plan: recommended;
Plan type: small group.
Source: GAO analysis of HHS documents and the Henry Kaiser Family
Foundation as of January 3, 2013 and March 13, 2013.
[A] According to Minnesota officials, the state expects to organize
its market as an active purchaser in 2015.
[End of table]
Definitions: "Recommended" means that a state has recommended an EHB
benchmark plan to HHS or developed a preliminary EHB recommendation.
"Defaulted" means that a state has not recommended an EHB benchmark
plan and will default to the largest small group plan.
All seven states included in our review have taken steps to invite
health insurers to participate in their exchanges. For example, in
January 2013, New York released an invitation to participate and began
accepting applications for licensed insurers in the state (and those
expected to be licensed by October 2013) to apply for certain QHPs to
be offered through the New York exchange. The exchange governing board
will review the applications of individual health plans to make sure
they meet all federal minimum participation standards and other
requirements to be certified as QHPs. Officials reported that the
exchange anticipates certifying plans by mid-July 2013, and will be
ready for enrollment on October 1, 2013.
Minnesota and Oregon requested applications in October 2012 from
insurers who wanted to offer QHPs in the state's exchange, while the
District began accepting applications in April 2013. Insurers
certified through the exchange must demonstrate the ability to meet
minimum certification requirements including providing adequate
networks, care coordination, and quality measures, among other things.
Oregon officials told us the state plans to certify QHPs by the summer
of 2013 and begin enrolling consumers in October 2013.
States Encountered Time Constraints and Other Challenges, but Are
Moving Forward in Simplifying and Streamlining Eligibility and
Enrollment Systems:
All seven states in our review are in various stages of developing an
IT infrastructure that can support a streamlined and integrated
eligibility and enrollment system. A major focus of the states'
integration activities is redesigning their current Medicaid and CHIP
eligibility and enrollment systems. State officials described this as
the most significant and onerous aspect of developing an IT
infrastructure to support the exchange, given the age and limited
functionality of current state systems. All seven states in our review
use outdated systems, which lack the capacity to support web-based
streamlined processes.
Further, the majority of states operate multiple eligibility and
enrollment systems that serve individuals enrolled not only in
Medicaid and CHIP but in other public assistance programs, such as
Temporary Assistance to Needy Families (TANF) and the Supplemental
Nutrition Assistance Program (SNAP). These separate systems, which may
be managed by multiple entities across the state, have limited
interface capabilities. For example, similar to other states in our
review, Oregon operates multiple enrollment and eligibility systems,
whereby only a limited amount of enrollee information is accessible
and reusable across multiple programs. In addition, Oregon has
multiple interfaces between these programs to support integrated
business processes, making systems complex, inflexible, and expensive
to maintain. To address these kinds of issues, states are using
enhanced federal funding, referred to as the 90 percent match, to
either upgrade or rebuild their outdated Medicaid and CHIP eligibility
and enrollment systems to meet the requirements under PPACA.[Footnote
32] As states upgrade their Medicaid and CHIP systems, many are also
taking the opportunity to integrate enrollment and eligibility
processes for other public assistance programs, such as TANF and SNAP,
in order to provide shared services across programs.
In addition to upgrading eligibility and enrollment systems, six of
the seven states are in various stages of building the exchange IT
infrastructure needed to integrate these systems and allow consumers
to navigate among health programs and purchase QHPs through a variety
of access points, using a single streamlined application.[Footnote 33]
The integrated systems will enable states to collect information
needed for eligibility determination and verification, not only from
their own state systems, but from federal systems as well. These
systems are to utilize a federal data services hub provided by CMS,
which will serve as a single source of the federal data that are
needed to determine eligibility. To use this system, state systems are
to transmit requests for data through the federal data services hub to
multiple federal agencies, such as the Department of Homeland Security
and the Internal Revenue Service.[Footnote 34] The federal data
services hub is to return the data in near real-time back to the state
systems where it can be used to verify the information the states
collected for determining applicants' eligibility.
Two states--New York and Oregon--are further along in this work than
the other states in our review, as they were awarded early innovator
grants to develop an IT infrastructure that will integrate Medicaid,
CHIP, and other programs. To develop its state integrated systems,
Oregon will use a commercial framework that can be easily adopted and
used by other states. As part of its approach and consistent with the
intent of the early innovator grant, Oregon has begun working with
multiple states to share this framework, including their analyses,
design, and other components.
CCIIO officials indicated that readiness testing of states'
eligibility and enrollment systems for the exchange will begin in
March 2013 and continue through August 2013. To date, three of the
states in our review--Nevada, New York and Oregon--have begun testing
various aspects of their eligibility, enrollment, and federal data
services hub functionality with CCIIO. According to CCIIO officials,
the remaining states in our review are expected to begin testing over
the next few months. Most state officials told us that because of the
complexities of developing an integrated and streamlined eligibility
and enrollment system, they plan to use a phased approach to
implementation to ensure that key system changes are in place before
2014. Specifically, they will focus first on ensuring that new systems
are capable of determining eligibility for enrollment in QHPs,
Medicaid, CHIP, and the exchange, and will integrate other assistance
programs--such as SNAP and TANF--during later stages.
While state officials reported they expect to be ready to enroll
individuals by October 1, 2013 and are moving forward with IT-related
efforts, officials in six states identified challenges they faced with
developing aspects of their systems, given compressed timeframes and a
lack of clear federal requirements related to the federal data
services hub. For example, exchange officials expressed concerns about
the timeframes for implementation, because of the complexities and
large undertaking of integrating and modernizing these systems.
Further, most officials reported that transitioning multiple programs
into a streamlined and coordinated eligibility and enrollment system
could take years to fully implement. Officials in six states told us
that developing business rules for the eligibility and enrollment
system was challenging because they did not have complete information
on the requirements of the federal data services hub. Because of
implementation timelines, however, these officials said they needed to
begin IT-related activities before receiving complete federal
guidance. Most officials reported they were concerned that this could
lead to changes late in the development process. To address this
uncertainty, a few states built in flexibility in their requests for
proposals when making procurement decisions. Officials in one state
also reported that, in order to meet timeframes, modifications to the
IT systems will be completed in 2014 (after enrollment begins), based
on guidance issued late in the development process. CMS has indicated
that while the federal data services hub is still under development,
CMS has released guidance to the states on how to access or verify
data through the federal data services hub through such sources as
webinars, conferences, and other forums. Despite the challenges
associated with developing the IT systems, officials in six states
reported their systems will be ready for enrollment by October 1, 2013.
States are Developing Outreach and Assistance Programs to Help
Consumers Enroll in the Exchange:
Six of the seven states included in our review are in various stages
of developing a consumer outreach and assistance program to reach out
to potential consumers and help them enroll. As a partnership state,
Iowa has not yet decided whether and to what extent it will assist HHS
with aspects of this function. Most states have contracted with or
plan to contract with vendors to design a program. The vendors will
assist with the exchanges' branding, which will be able to translate
materials into multiple languages and take into account the needs of
individuals with disabilities. The vendors will also design and
implement communications and marketing plans (for example, radio and
television ads) with the goal of enrolling the maximum number of
eligible individuals into the exchange.
As part of the consumer outreach and assistance programs, states will
use a range of tools to provide potential consumers with information
and assist them in enrolling in an exchange. These include:
Navigators and in-person assistors. Six of the seven states in our
review plan to use navigators and assistors to provide in-person
enrollment assistance to individuals applying for health insurance,
such as assisting individuals with selecting QHPs or providing
information to individuals in a way that is culturally and
linguistically appropriate. HHS plans to assume responsibility for
operating the navigator program in Iowa, since it is a partnership
state. Nearly all states told us that assistance will need to be
tailored to the unique needs of their populations. For example, Nevada
officials told us that their program must be able to accommodate
individuals who live in Nevada's remote frontier region, where
population density can be as low as two people per square mile and
which may lack infrastructure such as Internet access. New York
officials told us they will address linguistic and cultural challenges
reaching individuals in some of New York City's more diverse
communities.
Four states--the District, New York, Oregon, and Rhode Island--plan to
leverage state resources within existing health and human services
programs to support navigators and assistors. For example, Oregon
plans to model its navigator program after a state Medicaid program
that provides uninsured individuals with premium assistance and access
to health care information and resources. Similarly, New York, which
issued a request for application in February 2013 for in-person
assistors and navigators, will model its approach after its community
assistance programs and will provide assistance through a variety of
access points in other local areas across the state. New York
officials told us that the state plans to sign contracts with
navigators and in-person assistors in the summer of 2013 and begin
training them in August or September 2013.
Web portals and call centers. Six of the seven states in our review
are designing web portals and contact centers as part of their
consumer assistance and outreach initiatives. The seventh state, Iowa,
is a partnership state and is deferring this responsibility to HHS.
State planning documents in the remaining six states indicated that
the web portals and the contact centers will be central to assisting
residents. State officials told us that web portals, in particular,
will ease comparisons among health plans by providing standardized
information about each health plan's premium, benefit structure, and
cost-sharing provisions. For example, District officials told us that
a web portal, which is being developed in conjunction with the IT
infrastructure, will be the key access point for consumers to
interface with the exchange. Similarly, Minnesota is designing a
contact center that will offer multiple modes of assistance through
such means as Internet access, telephone, mail, and in-person
assistance. State officials told us they expect the customer service
functions will be ready to operate on October 1, 2013.
States Are Planning for Long-Term Sustainability with Multiple Revenue
Options, but Faced Uncertainties Estimating Costs:
Officials in six states in our review reported they are considering a
number of revenue options for financially sustaining their exchange.
[Footnote 35] For example, as part of the planning efforts to develop
these options, three states--Nevada, Minnesota, and the District--
created work groups to recommend options for achieving long-term
sustainability. In particular, both Minnesota and Nevada created
working groups intended to review and propose financing options to
enable the exchange to be self-sustaining by January 1, 2015.
While states reported they are considering options to fund ongoing
exchange costs, such as salaries and benefits, consulting services,
outreach and marketing, and information technology, three states will
charge fees to insurance carriers participating in the exchange.
Specifically:
* Oregon will charge an administrative fee to insurance carriers
participating in the exchange. In particular, carriers will be
required to pay a percentage of the premiums (up to 5 percent) based
on the number of enrollees in the exchange. The fee is designed to
decrease as enrollment in the exchange increases. For example, if more
than 300,000 individuals enroll in the exchange, the state exchange
will charge carriers up to a 3 percent fee. If enrollment is at or
below 175,000, the state exchange will charge carriers up to a 5
percent fee. Between 100,000 and 120,000 enrollees would be required
for the exchange to be self-sustaining using the maximum
administrative fee of 5 percent. Further, any excess revenues
generated above the cost of operating the exchange may be placed in a
reserve fund of up to 6 months of operating expenses or returned to
insurance carriers.
* Nevada plans to charge insurance carriers a per member per month fee
based on enrollment. In its financial sustainability plan, the state
estimated the fee will amount to between $7.13 and $7.78 per member
per month, which the state anticipates insurance carriers will build
into their QHP premiums. In addition, based on the state's estimates,
the state expects the fee will be paid by the advance premium tax
credit. Nevada is also considering other potential sources of
supplementary revenue, such as fees charged for stand-alone vision and
dental plans.
* Minnesota plans to charge an administrative fee to insurance
carriers participating in the exchange. Specifically, insurers will be
required to pay a percentage of the premiums (about 3.5 percent) sold
through the exchange. The fee will be based on the volume of insurance
premiums for plans sold through the exchange.
While the states in our review have developed financing options, some
state officials identified challenges with developing these options,
given uncertainties related to exchange enrollment. Specifically,
financial sustainability will be highly dependent on the size of
enrollment and the take up rate, which is the percent of individuals
that are estimated to enroll in coverage out of the entire eligible
population. Some state officials reported that, estimating enrollment
patterns without the benefit of historical data from the exchange,
could impact revenue projections. Further, according to one state,
uptake estimates among various groups are "drastically different," so
that estimating enrollment could result in significantly different per
member per month carrier fees required to fund the exchange. Officials
from two states reported that given these uncertainties, they expect
to make adjustments to these estimates over time.
Agency Comments:
We provided a draft of this report to the Secretary of HHS for review
and comment. In response, HHS provided technical comments, which we
incorporated as appropriate. Additionally, we provided excerpts of the
draft report to exchange officials, such as the executive director and
chief policy research and evaluation officer, in the seven states we
interviewed for this study. We incorporated their technical comments
as appropriate. As arranged with your offices, unless you publicly
announce its contents earlier, we plan no further distribution of this
report until 30 days after its issue date. At that time, we will send
copies of this report to the Secretary of HHS and interested
congressional committees. In addition, the report will be available at
no charge on the GAO website at [hyperlink, http://www.gao.gov]. If
you have any questions concerning this report, please contact Stanley
J. Czerwinski at (202) 512-6806 or czerwinskis@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. Key contributors to this report
are listed in appendix II.
Sincerely yours,
Signed by:
Stanley J. Czerwinski:
Director, Strategic Issues:
[End of section]
Appendix I: Objectives, Scope & Methodology:
This report addresses the following objectives: (1) identify states'
responsibilities for establishing health benefit exchanges; and (2)
describe the actions selected states have taken to establish exchanges
and the challenges they have encountered.[Footnote 36]
To identify states' responsibilities for establishing exchanges and
the challenges they encountered, we reviewed selected Patient
Protection and Affordable Care Act (PPACA) provisions and Department
of Health and Human Services (HHS) implementing regulations and
guidance related to the following categories:
* establishing a governance and operating structure;
* ensuring exchanges will be capable of certifying qualified health
plans;
* simplifying and streamlining eligibility and enrollment systems;
* conducting consumer assistance and outreach; and:
* ensuring the financial sustainability of the exchange.
Our review of HHS's guidance included HHS's blueprint for approval of
state-based and partnership exchanges, information bulletins,
questions and answers, and webinars. We also reviewed reports that
have summarized state responsibilities with regard to the categories
we included in our study, including those completed by federal
agencies monitoring the implementation process and national
associations that play a role in assisting states with implementation.
Specifically, we reviewed reports from the Congressional Budget
Office, the Congressional Research Service, and relevant state
associations, such as the National Association of Insurance
Commissioners, the National Conference of State Legislatures, the
National Association of State Budget Officers, and the National
Academy for State Health Policy.
To identify actions selected states have taken to create exchanges and
the challenges they encountered, we conducted semistructured
interviews with officials in seven states: the District of
Columbia,[Footnote 37] Iowa, Minnesota, Nevada, New York, Oregon, and
Rhode Island. We selected these states on the basis of:
1. The percentage of the uninsured population in states based on a 3-
year average (2008 to 2010);
2. The percentage of the uninsured population in states in 2011;
3. The amount of exchange grants awarded to states on a per capita
basis;[Footnote 38]
4. Geographic dispersion; and:
5. The type of exchange states intended to establish, based on data
publicly available as of September 27, 2012.[Footnote 39]
Table 3 shows the characteristics of the states selected for our
review. We initially selected two states that intended to operate as
federally facilitated exchanges--Florida and Maine. However, exchange
officials in both states declined to be interviewed. Therefore, this
review focused on states' responsibilities to establish state-based
and partnership exchanges.
Table 3: Characteristics of States Included in GAO Study:
Selected States: District of Columbia;
Percentage of the uninsured population based on 3-year average: 11.4%;
Percentage of the uninsured population in 2011: 8.4%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $136.6;
Census region: South;
Status of intended state action, as of September 27, 2012: State-based.
Selected States: Iowa;
Percentage of the uninsured population based on 3-year average: 10.7%;
Percentage of the uninsured population in 2011: 10%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $11.6;
Census region: Midwest;
Status of intended state action, as of September 27, 2012: Studying
options.
Selected States: Minnesota;
Percentage of the uninsured population based on 3-year average: 8.7%;
Percentage of the uninsured population in 2011: 9.2%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $13.9;
Census region: Midwest;
Status of intended state action, as of September 27, 2012: Studying
options.
Selected States: Nevada;
Percentage of the uninsured population based on 3-year average: 20%;
Percentage of the uninsured population in 2011: 22.6%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $27.7;
Census region: West;
Status of intended state action, as of September 27, 2012: State-based.
Selected States: New York;
Percentage of the uninsured population based on 3-year average: 14.2%;
Percentage of the uninsured population in 2011: 12.2%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $9.5;
Census region: Northeast;
Status of intended state action, as of September 27, 2012: State-based.
Selected States: Oregon;
Percentage of the uninsured population based on 3-year average: 16.5%;
Percentage of the uninsured population in 2011: 13.8%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $16.9;
Census region: West;
Status of intended state action, as of September 27, 2012: State-based.
Selected States: Rhode Island;
Percentage of the uninsured population based on 3-year average: 11.5%;
Percentage of the uninsured population in 2011: 12%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $61.5;
Census region: Northeast;
Status of intended state action, as of September 27, 2012: State-based.
Selected States: Florida[A];
Percentage of the uninsured population based on 3-year average: 20.7%;
Percentage of the uninsured population in 2011: 19.8%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $0;
Census region: South;
Status of intended state action, as of September 27, 2012: Federally
facilitated.
Selected States: Maine[B];
Percentage of the uninsured population based on 3-year average: 9.9%;
Percentage of the uninsured population in 2011: 10%;
Exchange grants awarded on a per capita basis as of September 27,
2012: $0.8;
Census region: Northeast;
Status of intended state action, as of September 27, 2012: Federally
facilitated.
Source: GAO analysis of U.S. Census Bureau and HHS data.
[A] Florida was initially selected for inclusion in our review based
on our selection criteria noted, but exchange officials declined to be
interviewed for our study.
[B] Maine was initially selected for inclusion in our review based on
our selection criteria noted, but exchange officials declined to be
interviewed for our study.
[End of table]
We conducted initial interviews in person and by telephone between
October and November 2012 and follow-up interviews between February
and March 2013. The interview questions focused on states' actions
regarding establishing an exchange and the challenges they encountered
in the following areas: establishing an operating and governance
structure, developing information technology systems and
infrastructure to support a streamlined eligibility and enrollment
system, ensuring exchanges will be capable of certifying qualified
health plans, creating consumer outreach and assistance, and ensuring
the exchange's financial sustainability. We also met with budget
officials in some of the states to discuss the fiscal aspects of
establishing exchanges, including how states will ensure exchanges are
financially sustainable. The responses to the interviews are not
intended to be representative of all state exchange and budget
officials.
To supplement our interviews, we reviewed state planning, budget, and
implementation documents, such as state blueprint applications,
business plans, exchange grant applications, and contracting documents.
In addition, we conducted interviews with officials from the Centers
for Medicare & Medicaid Services (CMS) and CMS's Center for Consumer
Information and Insurance Oversight and relevant state associations,
including the National Association of State Budget Officers, National
Conference of State Legislatures and the National Association of
Insurance Commissioners.
We conducted our work from September 2011 to April 2013 in accordance
with generally accepted government audit standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings
and conclusions based on our audit objectives. We believe that the
evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Stanley J. Czerwinski, Director, Strategic Issues, (202) 512-6806 or
czerwinskis@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Brenda Rabinowitz, Assistant
Director; Kisha Clark, Analyst-in-Charge; Sandra Beattie, Amy Bowser,
Robert Gebhart, Sherrice Kerns, Cynthia Saunders, Stacy Ann Spence,
and Hemi Tewarson made key contributions to this report.
[End of section]
Footnotes:
[1] Pub. L. No. 111-148, 124 Stat. 119 (Mar. 23, 2010) (PPACA), as
amended by the Health Care and Education Reconciliation Act, (HCERA)
Pub. L. No. 111-152,124 Stat.1029 (Mar. 30, 2010). In this report,
references to PPACA include any amendments made by HCERA.
[2] Pub. L. No. 111-148, § 1311(b), 124 Stat. at 173.
[3] PPACA requires the establishment of a Small Business Health
Options Program, or SHOP--exchanges where small employers can shop for
and purchase coverage for their employees. Under PPACA, until 2016,
states have the option to define "small employers" either as those
with 100 or fewer employees or 50 or fewer employees. Beginning in
2016, small employers will be defined as those with 100 or fewer
employees. Beginning in 2017, states may allow large employers to
obtain coverage through an exchange (but will not be required to do
so). For purposes of our review, we did not include SHOP exchanges in
the scope of our work.
[4] Medicaid is a joint federal-state program that finances health
care coverage for certain categories of low-income individuals.
[5] CHIP is a federal-state program which provides health care
coverage to children 18 years of age and younger living in low-income
families whose incomes exceed the eligibility requirements for
Medicaid.
[6] Pub. L. No. 111-148, § 1413(c), 124 Stat. at 234.
[7] A partnership exchange is a variation of a federally facilitated
exchange. HHS will establish and operate this type of exchange with
states assisting HHS to carry out certain functions of that exchange.
[8] For purposes of this report, we focused on certain categories of
responsibilities. Therefore, this list does not include all states'
responsibilities related to creating and operating an exchange.
[9] Specifically, we selected states on the basis of whether they
intended to establish a state-based, federally facilitated, or
partnership exchange, as of September 27, 2012. At that time, states
had not yet formally declared their intention to HHS. We used the most
readily available information at that time from HHS and the Kaiser
Family Foundation.
[10] Beginning on January 1, 2014, a premium tax credit will be
available to help eligible tax filers and their dependents pay for
qualified health plans purchased through PPACA exchanges. The premium
tax credit is available on an advance basis, referred to as advance
payments of the premium tax credit, and any advance payments are
reconciled on a tax filer's tax return. Ultimately, tax credits will
be calculated using income reported on tax returns. The credits will
generally be available to eligible tax filers and their dependents who
are (1) enrolled in one or more qualified health plans through an
exchange, and (2) not eligible for other health insurance coverage.
More specifically, to qualify for the premium tax credit, an
individual or family must generally have income between 100 and 400
percent of the federal poverty level and not qualify for other health
care coverage, such as Medicare, Medicaid, or employer-sponsored
coverage that meets a minimum value standard specified in PPACA.
[11] PPACA provides cost sharing subsidies to certain individuals to
help them pay for costs related to the use of health services. Cost
sharing generally refers to costs that an individual must pay when
using services that are covered under the health plan that the person
is enrolled in. Common forms of cost sharing include copayments and
deductibles.
[12] The Basic Health Program (BHP) is an alternative to qualified
health plans under which states may offer subsidized coverage to non-
elderly individuals with incomes between 133 and 200 percent of the
federal poverty level who are otherwise not eligible for other types
of coverage such as affordable employer-sponsored insurance or
traditional Medicaid. For operating this program, states will receive
federal funding equivalent to 95 percent of the premium tax credits
and cost sharing reductions that would apply to individuals if they
were enrolled in exchange plans.
[13] PPACA requires states to establish exchanges by January 1, 2014.
Pub. L. No. 111-148, § 1311(b), 124 Stat. 173. The Secretary of HHS
must establish and operate an exchange in states that do not elect to
operate an exchange or in states where the Secretary determines, by
January 1, 2013, that a state has failed to take actions necessary to
establish an exchange. Pub. L. No. 111-148, § 1321(c), 124 Stat. 186.
Through subsequent guidance, HHS has identified options for states to
partner with HHS when HHS establishes and operates an exchange.
Specifically, under this model, states may assist HHS in carrying out
certain functions of the exchanges.
[14] These grants were awarded to states in 2010 and 2011, and are no
longer being awarded. These grants provided one year of funding and a
state could receive only one grant.
[15] There are two types of establishment grants. Level I
establishment grants, awarded to states in 2010, were available to all
states, whether they were developing a state-based exchange or
participating in a partnership exchange or a federally facilitated
exchange. These grants provided for one year of funding, and a state
could apply for multiple grants. Level II establishment grants,
awarded on a quarterly basis through 2015, are available only to
states that create a state-based exchange and are moving ahead at a
faster pace.
[16] As noted earlier, for purposes of this report, we refer to the
District of Columbia as a state.
[17] One state, Alaska, did not apply for and was not awarded exchange
grant funding.
[18] As of March 27, 2013, certain states had returned this funding to
HHS for reasons such as the state's decision not to pursue a state-
based exchange.
[19] Qualified individuals must reside in the state in which the
exchange is offered and include U.S. citizens and legal immigrants who
are not incarcerated.
[20] A state exchange may contract with an eligible entity, including
a state Medicaid agency or any other state agency, incorporated under
and subject to the laws of at least one state, that has demonstrated
experience on a state or regional basis in the individual and small
group health insurance markets and in benefits coverage, but is not an
issuer.
[21] CMS will work with states participating in state partnership
exchanges to ensure that such guidance is consistent with federal
regulatory standards and operational timelines. CMS anticipates that
states will choose to use the National Association of Insurance
Commissioners' System for Electronic Rate and Form Filing to collect
and review QHP data. The state will review issuer applications for QHP
certification for compliance with the standards and will provide a
certification recommendation for each QHP to CMS. CMS will review and
confirm the state's recommendations, coordinate plan preview, make
final certification decisions, and make available certified QHP plans
in the exchange for the relevant state partnership exchange. CMS will
work closely with states in state partnership exchanges to coordinate
this process.
[22] "Good standing" generally means that the insurer has no
outstanding sanctions imposed by a state's department of insurance.
[23] Under PPACA, states may require plans to offer benefits in
addition to these categories. States are required to either make
payments to individual enrollees or to the issuers to defray the costs
of these additional benefits.
[24] Pub. L. No. 111-148, §§ 1302 (d), 10104(b)(1), 124 Stat. 167,
896. Accordingly, the actuarial value of a plan represents the
expected percentage of costs the plan will incur for the EHB services
provided to a standard population. For example, a gold plan with an 80
percent actuarial value would be expected to pay, on average, 80
percent of a standard population's expected medical expenses for the
EHB. The individuals covered by the plan would be expected to pay, on
average, the remaining 20 percent of the expected cost-sharing
expenses in the form of deductibles, copayments, and coinsurance.
[25] Each state's benchmark plan will apply to their respective
exchanges for plan years 2014 and 2015, while HHS will revisit this
issue for the 2016 plan year.
[26] The term "small group market health plan" is defined as the
health insurance market in which employers with 100 or fewer employees
offer group health plans.
[27] States with either state-based exchanges or partnership exchanges
have the option of (1) allowing exchanges to make eligibility
determinations for Medicaid and CHIP or (2) having exchanges make an
assessment, with the state Medicaid agency or other relevant state
agency making the actual determinations of eligibility. In addition,
PPACA and implementing regulations provide for states, regardless of
whether they are establishing an exchange, to create a transitional
reinsurance program for 2014 through 2016 to help stabilize premiums
for coverage in the individual market. HHS will establish a
reinsurance program for any state that fails to establish this
program. Further, beginning with the 2014 benefit year, each state
electing to operate an exchange may establish a permanent risk
adjustment program for all non-grandfathered plans in the individual
and small group market both inside and outside of the exchanges. HHS
will establish this risk adjustment program for any state that will
not operate an exchange or for states operating an exchange but which
do not elect to administer the risk adjustment program. These risk-
spreading mechanisms are designed to mitigate the potential impact of
adverse selection and provide stability for health insurance issuers
in the individual and small group markets. We did not include states'
reinsurance and risk adjustment activities in the scope of our work.
[28] In determining eligibility for a QHP, exchanges must also
determine whether applicants qualify for premium tax credits or cost
sharing reductions for these plans. States electing to establish and
operate state-based exchanges, however, may choose to rely on HHS to
make these determinations.
[29] Unlike insurance agents and brokers, navigators are not
authorized to receive compensation or other forms of payment--either
directly or indirectly--from any health insurance issuer in connection
with the enrollment of any qualified individuals, or employees of a
qualified employer, in a QHP.
[30] HHS, Cooperative Agreement to Support Establishment of State-
Operated Health Insurance Exchanges, January 20, 2011.
[31] PPACA prohibits the awarding of establishment grants for
exchanges after January 1, 2015. HHS has clarified, however, that
states seeking federal funding to establish exchanges may be awarded
such funds until December 31, 2014.
[32] States may receive an enhanced administrative federal match--90
percent--for the design, development, and installation or enhancement
of eligibility determination systems until December 31, 2015. In order
to qualify for the 90 percent match, states must submit an advanced
planning document to CMS for review and approval. As part of its
review, CMS must determine that the design, development, installation,
or enhancement of a state's eligibility system meets a number of
standards and conditions, including seamless coordination with the
health insurance exchanges. The 90 percent match is available only for
costs incurred after April 19, 2011, and before December 31, 2015.
Beginning April 19, 2011, states may also qualify for a 75 percent
match for the operation of eligibility systems that continue to meet
applicable standards and conditions. This enhanced match is not
available for systems that do not meet these requirements by December
31, 2015.
[33] As a partnership state, Iowa is not required to establish an
exchange infrastructure.
[34] Other federal agencies include the Social Security
Administration, the Veteran's Heath Administration, Tricare, the Peace
Corps, the Office of Personnel Management, and CMS.
[35] As a partnership exchange, Iowa is not responsible for carrying
out this key function.
[36] For purposes of this report, we focus on certain categories of
responsibilities. Therefore, this list does not include all states'
responsibilities related to establishing an exchange.
[37] For ease of reporting and for purposes of this review, we refer
to the District of Columbia as a state.
[38] We calculated the amount of total planning, establishment, and
early innovator grants awarded on a per capita basis in each state as
of September 27, 2012. We divided the total amount of grants awarded
to states by the total state population.
[39] Specifically, we selected states on the basis of whether they
intended to opt for a state-based, federally facilitated, or
partnership exchange as of September 27, 2012. At that time, states
had not yet formally declared their intention to HHS through the
blueprint application. However, we used the most readily available
information at that time from HHS and the Henry Kaiser Family
Foundation.
[End of section]
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